testpanelSubjectBreak: A Test for the Subject-level Break using a Unitivariate...

In MCMCpack: Markov Chain Monte Carlo (MCMC) Package

A Test for the Subject-level Break using a Unitivariate Linear Regression Model with Breaks

Description

testpanelSubjectBreak fits a unitivariate linear regression model with parametric breaks using panel residuals to test the existence of subject-level breaks in panel residuals. The details are discussed in Park (2011).

Usage

testpanelSubjectBreak(
  subject.id,
  time.id,
  resid,
  max.break = 2,
  minimum = 10,
  mcmc = 1000,
  burnin = 1000,
  thin = 1,
  verbose = 0,
  b0,
  B0,
  c0,
  d0,
  a = NULL,
  b = NULL,
  seed = NA,
  Time = NULL,
  ps.out = FALSE,
  ...
)

Arguments

subject.id	A numeric vector indicating the group number. It should start from 1.
time.id	A numeric vector indicating the time unit. It should start from 1.
resid	A vector of panel residuals.
max.break	An upper bound of break numbers for the test.
minimum	A minimum length of time series for the test. The test will skip a subject with a time series shorter than this.
mcmc	The number of MCMC iterations after burn-in.
burnin	The number of burn-in iterations for the sampler.
thin	The thinning interval used in the simulation. The number of MCMC iterations must be divisible by this value.
verbose	A switch which determines whether or not the progress of the sampler is printed to the screen. If verbose is greater than 0, the iteration number and the posterior density samples are printed to the screen every verboseth iteration.
b0	The prior mean of the residual mean.
B0	The prior precision of the residual variance
c0	c_0/2 is the shape parameter for the inverse Gamma prior on \sigma^2. The amount of information in the inverse Gamma prior is something like that from c_0 pseudo-observations.
d0	d_0/2 is the scale parameter for the inverse Gamma prior on \sigma^2.
a	a is the shape1 beta prior for transition probabilities. By default, the expected duration is computed and corresponding a and b values are assigned. The expected duration is the sample period divided by the number of states.
b	b is the shape2 beta prior for transition probabilities. By default, the expected duration is computed and corresponding a and b values are assigned. The expected duration is the sample period divided by the number of states.
seed	The seed for the random number generator. If NA, current R system seed is used.
Time	Times of the observations. This will be used to find the time of the first observations in panel residuals.
ps.out	If ps.out == TRUE, state probabilities are exported. If the number of panel subjects is huge, users can turn it off to save memory.
...	further arguments to be passed

Details

testpanelSubjectBreak fits a univariate linear regression model for subject-level residuals from a panel model. The details are discussed in Park (2011).

The model takes the following form:

e_{it} = \alpha_{im} + \varepsilon_{it}\;\; m = 1, \ldots, M

The errors are assumed to be time-varying at the subject level:

\varepsilon_{it} \sim \mathcal{N}(0, \sigma^2_{im})

We assume standard, semi-conjugate priors:

\beta \sim \mathcal{N}(b_0,B_0^{-1})

And:

\sigma^{-2} \sim \mathcal{G}amma(c_0/2, d_0/2)

Where \beta and \sigma^{-2} are assumed a priori independent.

And:

p_{mm} \sim \mathcal{B}eta(a, b),\;\; m = 1, \ldots, M

Where M is the number of states.

OLS estimates are used for starting values.

Value

The returned object is a matrix containing log marginal likelihoods for all HMMs. The dimension of the returned object is the number of panel subjects by max.break + 1. If psout == TRUE, the returned object has an array attribute psout containing state probabilities for all HMMs.

References

Jong Hee Park, 2012. “Unified Method for Dynamic and Cross-Sectional Heterogeneity: Introducing Hidden Markov Panel Models.” American Journal of Political Science.56: 1040-1054. <doi: 10.1111/j.1540-5907.2012.00590.x>

Siddhartha Chib. 1998. “Estimation and comparison of multiple change-point models.” Journal of Econometrics. 86: 221-241. <doi: 10.1080/01621459.1995.10476635>

Examples

## Not run: 
  set.seed(1974)
  N <- 30
  T <- 80
  NT <- N*T

  ## true parameter values
  true.beta <- c(1, 1)
  true.sigma <- 3
  x1 <- rnorm(NT)
  x2 <- runif(NT, 2, 4)

  ## group-specific breaks
  break.point = rep(T/2, N); break.sigma=c(rep(1, N));
  break.list <- rep(1, N)

  X <- as.matrix(cbind(x1, x2), NT, );
  y <- rep(NA, NT)
  id  <-  rep(1:N, each=NT/N)
  K <-  ncol(X);
  true.beta <- as.matrix(true.beta, K, 1)

  ## compute the break probability
  ruler <- c(1:T)
  W.mat <- matrix(NA, T, N)
  for (i in 1:N){
    W.mat[, i] <- pnorm((ruler-break.point[i])/break.sigma[i])
  }
  Weight <- as.vector(W.mat)

  ## draw time-varying individual effects and sample y
  j = 1
  true.sigma.alpha <- 30
  true.alpha1 <- true.alpha2 <- rep(NA, N)
  for (i in 1:N){
    Xi <- X[j:(j+T-1), ]
    true.mean <- Xi  %*% true.beta
    weight <- Weight[j:(j+T-1)]
    true.alpha1[i] <- rnorm(1, 0, true.sigma.alpha)
    true.alpha2[i] <- -1*true.alpha1[i]
    y[j:(j+T-1)] <- ((1-weight)*true.mean + (1-weight)*rnorm(T, 0, true.sigma) +
    		    (1-weight)*true.alpha1[i]) +
    		    (weight*true.mean + weight*rnorm(T, 0, true.sigma) + weight*true.alpha2[i])
    j <- j + T
  }

  ## extract the standardized residuals from the OLS with fixed-effects
  FEols <- lm(y ~ X + as.factor(id) -1 )
  resid.all <- rstandard(FEols)
  time.id <- rep(1:80, N)

  ## model fitting
  G <- 1000
  BF <- testpanelSubjectBreak(subject.id=id, time.id=time.id,
         resid= resid.all, max.break=3, minimum = 10,
         mcmc=G, burnin = G, thin=1, verbose=G,
         b0=0, B0=1/100, c0=2, d0=2, Time = time.id)

  ## estimated break numbers
  ## thresho
  estimated.breaks <- make.breaklist(BF, threshold=3)

  ## print all posterior model probabilities
  print(attr(BF, "model.prob"))

## End(Not run)

MCMCpack documentation built on Sept. 11, 2024, 8:13 p.m.